The overall sentiment seems to be negative in the commercial real estate (CRE) market across CEE. Do you share that view or do you see the light at the end of the tunnel?

The overall sentiment is slightly negative however the debates are more about how long until the end of the tunnel. I trust that since having a tight labour market, aiming for the shortening of supply chains and hoping that the energy prices will continue to decrease, we can pass these hurdles shorter term enabling the corrections to follow in the coming 12-18 months.

Kata Mazsaroff

Managing Director
Colliers Hungary

Kata worked at Colliers between 2007 and 2020 where she established the Occupier Services business line, helping Colliers record the highest market share in tenant representation for several consecutive years in the Budapest market. Under Kata’s supervision, the department managed 250,000 sqm of projects for around €300 million lease value. Beyond Colliers, Kata’s experience includes Horizon Development, a Hungarian property developer, where she contributed by leasing to the sale of a mixed-use property in Budapest - Szervita Square Building. The deal was the 2021 benchmark transaction in the CEE region. After that Kata worked in Skanska's Commercial Development business unit, where she was responsible for leasing and asset management covering the Hungarian and Romanian markets. More »

What hurts the market most: the energy crisis, the economic slump, the new wave of Covid or the war in Ukraine?

All of the above have an impact on the CRE market. Even though we have adapted to Covid, we are still experiencing its consequence on the office market. Office occupiers are still working on their optimal hybrid way of working, shaping their space needs and size requirements. The general footprint decrease impacts the vacancy rate and we expect to see a further slight increase from today’s 11% in the next 1-2 years. 

The market players are in the planning phase as a reaction to the energy crises hence energy consumption is becoming a significant portion of the real estate operational costs. Amongst sustainable developments we expect the energy consumption together with the service charge to result in ~25-30% of the total real estate operating costs; in older generation A class buildings this portion may be significantly higher and in B category office buildings, these costs may even exceed their rent levels.

New developments concentrate on implementing real sustainable solutions and we are also experiencing that several landlords are in the process of assessing retrofitting their buildings to decrease energy consumption. Nevertheless, considering the overall operational cost of blue-chip companies and various others in sectors such as SSC and IT, the energy consumption should not adversely affect the operation of the occupier. 

As a top manager of a services and investment management company, how would you assess the short-term perspectives in Hungary?

Regarding industrial demand, Foreign Direct Investment (FDI) in the automotive industry remains robust. This also triggers further investment needs for companies on the supply chain creating additional demand for logistics. Short-term we expect further expansion in these sectors. In terms of the SSC Industry, despite having grown to be the 2nd largest employer in Hungary in the past decade, we assume fewer new entries will open their new operations in Hungary in the coming year. On the other hand, we expect SSC companies already present in our market to expand. We predict that this FTE growth may level out the SSC sector footprint size decrease arising from the hybrid way of working.

The market became tenant-driven over the past year or so. Tenant representation is a crucial business line at Colliers too. What are your plans to adjust these services to the rapidly changing demand?

As a reaction to the occupier demand and recently the energy crises, we have extended our Occupier Services and Green & Healthy Building Advisory service lines and have established our new „ESG Strategic Advisory” services for occupiers, developers and landlords. Building on our past 10 years of acquired understanding of sustainability through obtaining certificates, we also focus on supporting our clients on their pathway to net zero, enhancing social value & well-being, energy savings and more.  

Most of the office and retail segments as well as hotels are in trouble, while the industrial and logistics business is on the rise. But for how long?

The industrial and logistics market is extremely active, the FDI remains to enter Hungary, and we experience expansion in the manufacturing fields and logistics. 32% of the disclosed transactions arise from the new entries investing in the Hungarian market. There were 170,000 sqm of new leases signed in Q3 which is equivalent to the previous year’s average annual volume. We don’t know for how long these businesses are on the rise and how the economy will develop, it will be a good indication once we see the consumer data of Black Friday purchases, after-Christmas season figures and the general sentiment around springtime. We experience a slowdown in the acquisition of industrial plots in Budapest, developers are more cautious and want to keep their landbank at a moderate level. However, we predict that new entries that will generate further investments in the next 1-2 years.

Would you advise buying distressed assets to maximize ROI in Hungary? If not, why?

At a good, discounted level, yes, I would, depending on the asset’s characteristics, in case there is an opportunity to create a market conform product. There aren’t any distressed assets on the market now, but we do expect to see them in the coming 12 months’ mostly amongst the hotel, food & beverages retail sectors and B and C category properties.